A sea of worries for the euro
The victory of Syriza in the Greek elections probably has no FX market conclusions, though it is likely to be well-received in Euro zone risk sentiment as it sustains the reform process, says SocGen.
"On we go to the Catalan regional election. EUR/USD continues to track the Bund/Treasury spread and looks set to remain range-bound," SocGen adds.
"At some point, the focus may switch to the potential for further ECB easing but near term, EUR/USD follows risk sentiment - a sharp risk market sell;-off could see some EUR gains. Since such a move would also have the scope to trigger a further slide in USD/JPY, the case for long-term EUR/JPY shorts remains pretty strong," SocGen argues.
Translation: They expect risk aversion. I don't share the enthusiasm for this reasoning but the EUR/JPY chart is looking vulnerable to the downside.
